Administration to weaken O-Care formula, aiding insurers

The Obama administration plans to temporarily weaken a spending formula in ObamaCare to allow insurers to use more premium dollars on administrative costs.

The intention, announced Tuesday in the Federal Register, is seen as a way to ease pressure on insurers that faced unexpected costs last fall due to ObamaCare's botched rollout.

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Under the Affordable Care Act's medical loss ratio (MLR), insurers that offer plans on the individual and small-group markets must spend at least 80 percent of premiums collected on patient care.

The other 20 percent can be spent on administrative costs, CEO bonuses and profit, according to the law.

These rules have yielded billions of dollars in rebates to consumers every year and are a major talking point for the administration.

But federal health officials now appear willing to temporarily relax the standard, given the administration's long list of delays and changes to ObamaCare's rollout.

Many of the changes directly hit insurers, forcing companies to conduct additional consumer outreach and spend time reconsidering their plan offerings.

"Health plans made considerable investments in time, resources and manpower to minimize disruption to consumers caused by all the technical problems of HealthCare.gov," Robert Zirkelbach, spokesman for America’s Health Insurance Plans, told Kaiser Health News.

"Health plans should not be penalized for all the extra work they have done to help consumers through this process."

It is unclear when the administration will announce its final rules or how exactly the MLR will change.

The announcement was first reported by InsideHealthPolicy, a subscription news service.

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